Payroll Protection Program Funds
So, you received your Payroll Protection Program funds. Now What? Do you want the loan forgiven? If that’s your goal, it’s time to get your “Accounting” on. The loan forgiveness process will be administered by your bank, and we expect they will request supporting documentation to prove your case of loan forgiveness.
First, what is an acceptable use of the funds? Payroll costs, health care benefits, mortgage interest payments, rent, utility, interest payments, depending on your legal entity. In addition, you must use at least 75% of the proceeds on payroll costs.
Another important element is that you actually spend the funds in the covered period, which is defined as the 8-week period immediately after your receipt of the loan proceeds.
In order to document easier, our recommendation is to create a separate bank account to deposit the loan proceeds into. This way you have a head start on the accounting, and it might make it easier to document. You may also want to set up sub-accounts to assist in the tracking of eligible payments, or perhaps a Project or Job to assist in tracking.
Bottom line: document, document, document! Also, start projecting your payments now so you are not caught with an issue in week 8 when it is too late.
There are many tips, tricks or tweaks that we can do to assist if you need any help. Please call us for a consultation.
Michael S. Pruet, CPA